Twin balance sheet resolution to take up to 9 months: Assocham

Resolving the twin balance sheet problem -- of the accumulated non-performing assets (NPAs), or bad loans, of banks and huge debts of corporate India -- may take at least three quarters, industry body Assocham said on Sunday.

It also said the complementary process on companies set in motion under the Insolvency and Bankruptcy Code (IBC) would pick up speed in the coming months.

"It may take at least another three quarters before the problem of twin balance sheets of banks and highly leveraged corporate firms gets reasonably resolved, even as the process of resolution of the companies under IBC reference would pick up pace in the coming months," an Assocham release said here.

"Our own assessment is that it would take another six to nine months before the banks see revival of confidence to lend afresh as they would then see reasonable amount of their NPAs get unlocked through a resolution.

"Besides, with sales growth expected to witness a revival, the ability to service debt would improve considerably," it said.

Assocham Secretary General D.S. Rawat urged the Reserve Bank of India (RBI) to relax its recent norms for resolution of stressed assets, saying these are quite harsh both on the bank and the borrowers.

"These norms would aggravate rather than solve the problem of NPAs. Both the lenders and borrowers need to be given confidence and policy support," he said.

"As is evident from the stressed assets in steel and cement, there is a huge rush for acquiring the same. This shows there is a tremendous inherent value proposition and these assets can be turned into first-class performing assets within a few years."

He also said that in the coming months, the IBC process would see some refinement, even as the capacity to handle the cases would get built up in an institutionalised manner.

The government last year embarked on a two-pronged strategy on bad loans.

On the one hand, it has brought in the IBC which provides for a six-month time-bound insolvency resolution process, extendable by another 90 days. On the other hand, it has approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks.